Credit Suisse Securities v. Simmonds

U.S. Supreme Court

Question(s) Presented

Whether the two-year time limit for bringing an action under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), is subject to tolling, and, if so, whether tolling continues even after the receipt of actual notice of the facts giving rise to the claim

Tab Group

Merits Stage

Outcome

March 26, 2012

The Supreme Court held that even assuming that the 2-year period can be extended, the Ninth Circuit erred in determining that it is tolled until a §16(a) statement is filed.

NCLC urged the U.S. Supreme Court to hold that Congress expressly imposed a strict two-year statute of limitations on securities claims brought under Section 16(b) of the Securities Exchange Act of 1934, and that the statute of limitations may not be tolled. The case arises out of 54 related derivative complaints brought by the plaintiff shareholder, alleging that between 1999 and 2000 the underwriters of 54 dot-com IPOs allegedly engaged in “laddering” by arranging for post-IPO purchases of the securities at progressively higher prices. NCLC argued that the Ninth Circuit incorrectly held that § 16(b) is a “disclosure” statute, under which the time period is tolled until the insider discloses the transactions at issue in a mandatory § 16(a) report. Moreover, in reality lawsuits brought under 16(b) are driven primarily by attorneys’ fees because any profits recovered in a suit go to the corporation, not the named plaintiffs - therefore, only the plaintiffs’ attorneys have an economic interest in pursuing the lawsuit. There is no need to judicially distort the 16(b) tolling rule because the specialized plaintiffs’ bar has all the incentives and resources needed to detect and pursue legitimate claims under Section 16(b).